Portfolio Analysis & Optimization

Success By Design

Success at a pharmaceutical or biotechnology company can be summarized as picking the right products to develop and then implementing effectively. We use a powerful analytical approach to help you select those products for your company’s portfolio that will do the best job of achieving your strategic objectives.

Analysis Starts With Forecasting

Our portfolio analysis approach starts with constructing a risk-adjusted forecast for each project (product and indication) in the portfolio, using our product forecasting models, or similar methodologies. The goal at this step is to produce a project-level profit-and-loss statement, complete with a risk profile for revenue and cash flow.

Monte Carlo Simulation and the Product Risk Profile

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Objective Insights uses Monte Carlo simulation for risk analysis. Monte Carlo simulation allows you to enter a range of possible values for many project variables, so precise estimates are not required for every input. This approach allows your company to see the full range of possible revenue and cash flow scenarios, including cases where product development fails.

Quantitative Approach to Analysis

The number of portfolio combinations increases exponentially as you consider more projects. A two-step, quantitative approach is required to deal with this complexity.

We apply portfolio constraints as the first step in the process in order to eliminate potential portfolio combinations that your company would immediately rule out.

For example, you can specify that your company would only have a certain number of projects:

  • In development overall (minimum, maximum)
  • In particular development phases
  • In defined therapeutic areas, indications, or types of products

You can also specify that some projects are always included in the portfolio as another way to reduce the number of potential combinations.

Selecting the Portfolio

Once we have ruled out portfolios that do not meet the constraints, we then rank the remaining portfolios according to a number of performance measures, such as revenue, cash flow, expected net present value, and probability of achieving timing targets. We take the top-ranked portfolios from this step (called static analysis) and advance them to the final step of the process: portfolio-level risk analysis.

Portfolio-level risk analysis allows us to compare the risk-adjusted return of different portfolio combinations. It is only through portfolio-level risk analysis that we can measure and then manage risk. It is the risk of the portfolio, not the individual projects in the portfolio, that is important to your company. Maximizing return while minimizing risk is paramount in choosing the optimal portfolio.

We then select the top-ranked static and risk-adjusted portfolio combinations and present them to your management team as the final candidates. We facilitate your final portfolio selection process by graphically presenting the results in an easy-to-comprehend manner.

Objective Insights can help you manage the complexity of choosing a development portfolio. Let our sophisticated yet transparent quantitative approach save you the guesswork of assembling a portfolio that meets your company’s goals.

Tools Used

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Portfolio Optimizer™

Helps to structure your product portfolio to minimize risk and maximize reward

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